Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Note 9—Income Taxes

        The components of income from continuing operations before income taxes were as follows (in thousands):

	Fiscal Years
	2011		2010		2009
US	$	40,122	$	33,188	$	27,622
Foreign		1,200		2,222		1,497
Total	$	41,322	$	35,410	$	29,119

        The components of the provision for income taxes included (in thousands):

	Fiscal Years
	2011			2010			2009
Current:
Federal	$	8,857		$	4,776		$	783
State		1,005			939			1,194
Foreign		1,241			821			363
Deferred:
Federal		2,633			4,959			6,361
State		(276	)		(320	)		(539	)
Foreign		(469	)		(84	)		183
Total	$	12,991		$	11,091		$	8,345

        The effective income tax rate on earnings differed from the statutory federal tax rate as follows:

	Fiscal Years
	2011			2010			2009
Statutory federal rate		35.0	%		35.0	%		35.0	%
State taxes		3.8			5.4			5.3
Stock compensation relating to incentive stock options and employee stock purchase plans		0.1			(1.5	)		0.9
Research and other state tax credits		(8.0	)		(9.1	)		(10.2	)
Change in valuation allowance		0.5			(1.7	)		(2.9	)
Change in state contingency reserve		(0.4	)		1.0			—
Foreign taxes		0.6			(0.1	)		0.3
Impact of state tax rate changes on net deferred tax assets		—			1.3			(0.3	)
Other, net		(0.2	)		1.0			0.6
Effective income tax rate		31.4	%		31.3	%		28.7	%

        As of December 31, 2011, Advent made no provision for a cumulative total of $13.7 million of undistributed earnings for certain non-US subsidiaries, which are deemed to be permanently reinvested.

        The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):

	December 31
	2011			2010
Deferred tax assets, current:
Deferred revenue	$	3,151		$	2,534
Other accrued liabilities and reserves		3,879			3,529
Stock compensation		9,074			10,056
Other		190			239
Total deferred tax assets, current		16,294			16,358
Non-current deferred tax assets:
Depreciation and amortization		(4,293	)		(4,576	)
Net operating losses, capital losses and credit carryforwards		31,324			35,010
Other		4,612			3,977
Valuation allowance		(892	)		(820	)
Total deferred tax assets, non-current		30,751			33,591
Deferred tax assets		47,045			49,949
Deferred tax liabilities		(2,930	)		(534	)
Net deferred tax assets	$	44,115		$	49,415

        The Company maintains a valuation allowance against its deferred tax assets relating to capital losses and investment reserves of $826,000 and certain state net operating losses of $66,000 as it believes that based upon the available evidence, it is more likely than not that these assets will not be realized. If it is determined in the future that it is more likely than not that these deferred tax assets will be realized, the valuation allowance will be reduced.

        At December 31, 2011, Advent had federal net operating loss carryforwards of approximately $37.6 million, which includes stock-based compensation deductions of $20.9 million. Utilization of these loss carryforwards, including losses obtained from acquisitions, is subject to certain limitations under the federal income tax laws. These net operating loss carryforwards expire between 2021 and 2027. Also at December 31, 2011, Advent had state net operating loss carryforwards in various states in which it files tax returns.

        Advent had federal research credits of $24.9 million which expire between 2012 and 2030. Advent also had California research credits of $18.1 million and California enterprise zone credits of $6.7 million which do not expire.

        The following table summarizes the activity relating to the Company's unrecognized tax benefits during 2011, 2010 and 2009 (in thousands):

	Total
Balance at January 1, 2009	$	6,904
Gross increases related to current period tax positions		563
Balance at December 31, 2009	$	7,467
Gross increases related to tax positions in prior period		431
Gross increases related to current period tax positions		1,603
Balance at December 31, 2010	$	9,501
Gross decreases related to tax positions in prior period		(185	)
Gross increases related to current period tax positions		1,828
Balance at December 31, 2011	$	11,144

        If recognized, the portion of unrecognized tax benefits at December 31, 2011 that would decrease Advent's tax provision and increase net income is $9.2 million. The impact on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. Advent recognizes interest and penalties accrued on unrecognized tax benefits as well as interest received from favorable settlements within "Provision for income taxes" on the consolidated statement of operations. As of December 31, 2011, Advent has accrued a nominal amount of interest and penalties for specific exposures in two states. Advent has not accrued any interest or penalties for its federal and other state reserves, as any reversal of uncertain tax positions would not result in the assessment of penalties or interest due to the Company's surplus of deferred tax assets that would offset any additional tax.

        Advent is subject to taxation in the US and various states and foreign jurisdictions. Advent is currently undergoing a State of California franchise tax examination for the 2006 and 2007 tax years. Advent is not under examination in any other income tax jurisdiction at the present time and does not anticipate the total amount of its unrecognized tax benefits to significantly change over the next 12 months. The material jurisdictions that are subject to examination by tax authorities include federal for tax years after 2007 and California for tax years after 2005.